ITAT Ahmedabad Holds Form 26AS Mismatch Alone Insufficient For Addition, Restores ₹42.34 Lakh Issue

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) on 17 June held that a mismatch between revenue reflected in Form 26AS and a taxpayer's books of account does not, by itself, justify an addition, and that such discrepancies require a proper reconciliation exercise before any addition can be sustained.

Vice-President Dr. B.R.R. Kumar and Judicial Member Rahul Chaudhary allowed the appeal filed by Checkmate Services Pvt Ltd for statistical purposes and remanded the Rs. 42.34 lakh addition to the Assessing Officer for fresh consideration after reconciliation. The Bench held:

“Given the nature of the assessee's business, such mismatches may not be indicative of income concealment.”

The Assessing Officer had identified a difference of Rs. 42.34 lakh between revenue reported in Form 26AS—reflecting tax deducted at source and corresponding income entries—and the revenue disclosed in the company's audited books for AY 2016-17. The addition was later sustained by the Commissioner of Income Tax (Appeals).

Checkmate Services Pvt Ltd, a security services provider, argued that the mismatch arose due to practical and accounting factors, including differences in accounting methods adopted by customers, TDS being deducted on gross amounts, tax deduction on reimbursements, timing differences across financial years, and instances of incorrect PAN quoting by deductors. It also submitted that limited time during assessment proceedings prevented it from preparing a complete reconciliation.

The Tribunal noted that while the company had offered plausible explanations, it failed to furnish a detailed party-wise reconciliation or supporting documentation before the Assessing Officer and the appellate authority. The Commissioner (Appeals) had also found the explanations to be general in nature and unsupported by evidence.

The Bench directed the Assessing Officer to re-examine the issue after considering a complete reconciliation to be filed by the taxpayer along with supporting documents. It further directed that the taxpayer be given a reasonable opportunity of being heard during the remand proceedings.

Accordingly, the ITAT allowed the ground relating to the Form 26AS mismatch for statistical purposes and restored it to the Assessing Officer for reconsideration.